Why travel is about to get more expensive

Just when travellers thought it was safe to loosen the purse strings, rising costs are set to make for some tighter travel budgets this summer.

So what’s going on, and what can you to balance the increases? Here’s a look at what’s happening.

Why costs are increasing

Demand goes up, discounts go down. It’s a classic case of supply and demand: more people are travelling for business and leisure, so companies don’t have to offer incentives to tempt travellers. In fact, they’re confident about raising their rates anticipating that people will pay either way thanks to rising demand.

How much are costs going up depends on the company. For instance, Norwegian Cruise Line announced a 10 per cent fare hike as of April 1, and Carnival has added 5 per cent to its summer sailings. Industry watchers note that other lines will likely follow suit.

What about hotels? No surprises here — industry reports indicate many hoteliers like Accor, Marriott, Hilton and Intercontinental expect to raise room rates again this year despite a swathe of new hotels. The increases will help keep pace with rising energy and labour costs, and even net some extras profits too, according to an article on Bloomberg.com.

Fuel costs on the rise. Whether you’re travelling across town or across the globe, you’re likely to feel the pinch. We know the causes: increased demand for oil and continuing unrest in the Middle East have caused a sharp rise in the price of oil — and neither situation shows immediate signs of easing.

What does this mean for travellers? First of all, you’ll need to budget more for gas for that road trip. While prices vary across Canada and the U.S., many areas have seen a 20-25 cents per litre jump in the past six months, and experts predict the cost of oil to remain high throughout 2011.

And, as we learned back in 2008, these costs hit all transportation sectors. Many airlines and tour companies have already upped their fuel surcharges — including Air Canada, which added an extra $10 to international economy flights, and Sunquest, which tacked on $30 to its $90 fuel surcharge — and there will be more to come.

What about other modes of transportation? In the past “increasing energy costs” have been a factor for fare hikes on buses and trains, so it’s possible we could see more. So far cruise lines haven’t returned to fuel surcharges — yet — but public transit and taxi fares could also be affected.

More fees, fewer perks. Seems like you’re paying more and getting less? Many providers have kept their rates and fares “low” by piling on the fees and cutting services. Want an advanced seat assignment or need to travel close to peak holidays? There are fees for that. You can also expect to pay more to reserve over the phone, check your baggage and change your ticket. Free meals and snacks are also disappearing.

And that’s just air travel — hotels and rental car companies have also become notorious for heaping on extra charges, so experts warn to read their polices ahead of time and pay attention to your bills.

While there are many fees you can’t avoid, being informed can help you dodge some costs. For instance, weighing and measuring your baggage before you travel can help you avoid hefty overweight and oversized baggage fees.

New taxes. Travelling in Canada? In 2010, British Columbia and Ontario introduced the Harmonized Sales Tax, and many items that used to be GST-only now have an extra 7 or 8 per cent tacked on. In addition, Nova Scotia raised its HST rate from 13 to 15 per cent.

How does that affect travel? Expect to pay more in taxes on hotel rooms and taxis, not to mention travel within Canada by bus, train, boat or plane when departing from these provinces. Plan to take advantage of BC’s tasty treats? Restaurant meals now have the added tax as well.

New security measures? In the past couple of years, airport fees have increased thanks to new security measures like those controversial body scanners. You may have heard U.S. President Obama now plans to up security fees again. Current fees for U.S. passengers could more than double by 2014 from $2.50 to $5.50 one way, and Canadians could be expected to pay $5.50 when the changes come into effect.

But don’t worry just yet — right now the fee is a proposal for the 2012 budget so it won’t be happening any time soon.

What you can do about the costs

Unless already announced, anticipated price hikes aren’t guarantees. Industry predictions can postulate where prices are headed, but no one is quite sure what’s going to happen in the future. For instance, if more people stay home due to increasing costs, providers may be forced to rethink rate hikes.

While it’s hard to plan a vacation amidst financial turmoil, there are some ways you can ahead of the hikes:

Shop around. The deals won’t be forthcoming, so expect to spend time extra time and effort researching your trip. If you prefer not to do it yourself, enlist some expert help. Travel agents know the destinations and the companies, and can even negotiate rates and perks on your behalf.

Try something new. Get out of your travel rut by trying a budget-friendly destination instead of a tourist hotspot, or a booking a vacation rental instead of a pricy hotel. Another option? Try travel mystery shopping to earn back some of your expenses.

Look at the all-in price. Don’t be fooled by the ads — companies don’t always have to include the fees. Make sure you know what extra costs you’re expected to pay to fly, rent a car or spend the night in a hotel — and don’t forget to add in the tax!

Read policies carefully. Time to pay attention to the fine print — especially what happens if prices increase or decrease after you’ve already booked or gotten a quote. As always, get the details in writing and ask questions if there’s something you don’t understand.

Ask before you book. Looking for amenities like wireless internet access, a hotel gym, early (or late) check in or pick up? Don’t assume they’re free — ask about the costs before you commit.

Balance your budget. The basic principle of setting priorities hasn’t changed: spend where it matters, save where it doesn’t. For example, avoid overspending on accommodations if you won’t spend much time in your room, or even out a pricy admission with a free activity.

Keep an eye on the news. Unsure whether to book now or wait, or where to go? There’s already a lot of debate in the media as to what’s going to happen and what travellers should do. To stay on top of developments that could affect your plans, keep an eye on the news and the trends.

Right now, many experts claim that increases aren’t likely to crash anyone’s vacation plans — but they can certainly add up. While the issues are quite complex, no one wants to pay unnecessary costs or make too many sacrifices. The best advice? Stay informed, ask lots of questions and build a little more room into your savings.

How do you plan to beat rising travel costs? Share your tips in the comments.

Sources: Bloomberg.com, CBC News, CruiseCritic.com, The Globe and Mail, Farecompare.com, the International Air Transport Association, Travel Weekly.